Interesting & Important News & Analysis, August 29, 2019

China Admits to Slowdown — Albeit Grudgingly

They still want people to falsely believe the tariffs have little to do with it. The Chinese leadership knows the tariffs are hurting quite a bit and will hurt all the more the higher the tariffs go.

Is the Democratic Party the party of the people or the party of the corporatists? For a long time now, it has been the party of the corporatists. Bernie Sanders has been saying forever that he wants to revolutionize the Democratic Party to finally make it the party of the people. How can he do that if the corporatists shut down the revolutionary-wing of the Party by banning it before it can take over the Party? This has always been the issue with the Sanders Movement.

Democrats disavow Obama’s creation of rival political group

That’s a bad title for the article. The salient aspect of the article is not that the Party wants to block a future Obama-type impact but block Sanders now because Sanders is substantially to the left of Obama and obviously desirous to be in a position not only to stand up to the corporations that are being anti-democratic and that are putting profits over the welfare of the whole People but to be in a position to turn the tide via law against those particular corporations.

Those corporations are scared to death that the heart and soul of the Democratic Party will be altered to benefit the whole people over the selfish wants of those corporations.

Will Sanders succeed?

Most people openly to the left of Sanders’s stated goals aren’t holding their breath but believe a third party is necessary. They usually put the “economic-class warfare” first. They usually divide over two main issues: 1) violence versus anti-violence as a means for proper results and 2) democracy for the revolutionary’s only or democracy that will still include everyone. Stalinists are completely out of the picture.

The high price of dollar safety

They see the US’s persistently wide trade deficit, high private and public indebtedness, and haemorrhage of good jobs to foreign shores, as an “exorbitant burden” of which they would like to be relieved.

But how to relieve it? Two senators think they have a solution. They have proposed a Bill that would mandate the Fed to impose a variable charge on inflows of capital over $10,000. The idea is that the charge would discourage investors from buying dollar-denominated assets, particularly on a short-term basis. Dollar demand would fall, the dollar exchange rate would weaken, and the trade deficit would narrow. The Bill proposes that the charge should be set at such a level that the trade deficit would shrink to within 0.5% of GDP from its current level of around 3% of GDP. That is quite a drop.

… But the US is the provider of safe assets to the whole world. There is no substitute for dollar-denominated safe assets, either as a safe savings vehicle or – importantly – as collateral for borrowing and lending dollars. The proposed tax on capital inflows therefore amounts to an attempt to force the rest of the world to give up its desperate quest for safety.

Satisfying investors’ craving for dollar safety comes at a very high price. The world desperately needs a lower dollar, but escalating tariffs on imports and taxes on capital flows are not going to bring it down. They are more likely to raise it, to everyone’s detriment. And as the dollar rises, so does the global political temperature.

What is really needed is a new Plaza Accord.

The problem is governmental borrowing. The US should simply issue additional dollars without borrowing (without using bonds or the like). If enough new money were issued, the value of the dollar would fall. Simple! It wouldn’t matter how many people were to buy dollars of save dollars. Just issue enough so that enough of the new dollars would circulate enough to meet the world’s constantly increasing demand for liquidity. Stop using the dollar as an imperial weapon. Let is become the only currency needed in the whole world. We’d all be better off.

Updated Estimates from ITEP: Trump Tax Law Still Benefits the Rich No Matter How You Look at It

President Trump’s allies in Congress continue to defend their 2017 tax law in misleading ways. Just last week, Republicans on the House Ways and Means Committee stated that most “of the tax overhaul went into the pockets of working families and Main Street businesses who need it most, not Wall Street.”

Interestingly, this statement does not dispute the fact that most of the benefits of TCJA go to the rich. ITEP’s most recent analysis estimates the richest 5 percent of taxpayers will receive $145 billion in tax cuts in 2020, which is half of the law’s benefits that go to U.S. taxpayers. The richest 20 percent of taxpayers will receive $205 billion in 2020, which is 72 percent of the law’s benefits that go to U.S. taxpayers.

Rather than cutting taxes on the rich, taxes on the poor should be completely eliminated.

The yuan hit an 11-year low this week. Here’s a look at how China controls its currency

… there is fear that a rapidly weakening yuan may lead to significant capital outflows, where investors move their assets out of a country due to perceived instability and to prevent their wealth from depreciating. There are also concerns about credit markets freezing up and domestic financial conditions tightening, like it did after the yuan fell 2% in 2015. It has taken China years to stabilize its capital outflows since then.

… China is still not willing to lessen restrictions on fears that there will be massive capital outflows as many Chinese investors may move their money outside the country and into the international market.

Why is Xi afraid of that? Even though China has clamped down hard on moving money out of China, he’s afraid that the Chinese people would still manage to do it. If they were able to make as much or more money outside China as inside China, they’d not be controllable by Xi. They’d not be beholden to the Chinese Communist Party dictatorship. The rest is self-explanatory. Xi won’t allow them such freedom.

Front Line: Manufacturers Look to Nontraditional Locations

Driving much of the training is automation. “Manufacturing plants today have a much higher level of automation than even 10 years ago,” Comerford says, but “workforce needs have changed considerably.”

This brings us back to political chest-beating over number of jobs created. Manufacturing lost six million jobs from 2000 to 2010 as companies moved low-skilled jobs offshore. About 1.5 million manufacturing jobs have been since added back, but not necessarily in the places that lost them.

Which Countries Have the Most Wealth Per Capita?

The United States boasts 41% of the world’s millionaires, but it’s clear that the fruits of labor are enjoyed by only a select group—average wealth ($403,974) is almost seven times higher than median wealth ($61,667). This growing inequality gap knocks the country down to 18th place for median wealth.

TCDI warns of national ‘loan insurance’ scam

The perpetrators allegedly contact consumers who have inquired online about securing a loan, using the name Val Taylor/Val Taylor Investments (this person is also a victim). The perpetrators then tell the consumer they can arrange the loan, but the borrower must first purchase a “Loan Payment Protection Insurance” policy that will pay the loan, in the event the borrower is unable to make payments and avoid default.

Security Deposit Basics for Landlords

The following is a prime example of the MMTers’ semantical/context trap.

Zimbabwe for hyperventilators 101

The right think that when the workers get a pay rise it is inflation. It is not. The left think that when the corporate sector increase the price of a good or service it is inflation. It is not. It is also not inflation when the exchange rate falls pushing the price of imports up a step.

When the workers get a pay raise, it is definitely wage inflation. It doesn’t matter if some economists have gathered to define it away.

The issue isn’t whether a wage increase is synonymous with an expansion or an inflation event. The issue is whether that event is offset such that the event is benign or even beneficial as opposed to harmful (typically in the aggregate). The same applies to price inflation or exchange-rate-caused price inflation.

The economists’ differing definitions are irrelevant to any practical discussion. They only lead to pointless arguments. MMTers are not the only offenders, as libertarian capitalists also refuse to accept the MMTers’ context.

I was ostracized in an MMT forum for pointing this out and explaining that the needless “context framing” only serves to delay fixes to the actual system causing so much damage.

Small Multifamily is Home to a Wide Mix of Workers

Workers in high-skill science, technology, engineering, arts and design, and mathematics (STEAM) occupations made up the biggest share of renters in large apartment buildings, at 37%. The share drops off to 26% in small multifamily, and further to 21% in SFRs.

The US is about to send a lot more oil into an already oversupplied world market

The article rah-rahs the future of US oil industry, but the following is more telling.

“Obviously, companies are cutting back. They’re cutting back in terms of investment and activity. You see the rig count coming down. You still see production efficiencies driving growth, but you’ll have a slower rate of sequential growth from here,” said Blanch. He noted that U.S. rig count was down 12% from year-ago levels at the middle of August.

Also, the article doesn’t even mention the global-warming issue and the impact the Green New Deal and such could have.

DuPont Says It Will No Longer Buy Firefighting Foam With Suspect Chemicals

Waiting until 2022 is not a good idea.

North Carolina Insurers Request 19.2% Rate Increase for Dwelling Policies

The premium increases are mostly due to global warming due to the coal, oil, and gas industries.

Fire Official Says Oregon Wildfire Risk Map Flawed

A fire official says a wildfire risk map being created by Deschutes County, the home of Bend, Oregon, underestimates fire danger because it doesn’t take into account the danger when homes catch fire in densely built suburbs.

Regional municipal ransomware attacks soar; MS-ISAC can help

… Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) has elevated ransomware attacks to one of its top priorities. CISA Director Chris Krebs recently says he’s intent on developing a ransomware “doctrine” similar to how feds and states deal with hurricanes.
How local governments can protect themselves

Until then, all local governments can do to protect themselves is undertake the necessary cyber hygiene steps ….

Again and again and again, where’s the mainstream calling for banning Bitcoin and the other cybercurrencies necessary for the crooks to hide behind? The crooks aren’t hitting the federal government because the US Congress would push to ban Bitcoin, etc., and get it done. The local governments need to start screaming at the US Congress to do it now.

Malware Operation Making Millions Defeated by Design Flaw

Quite a reminder:

Real journalism is different from the gossip, punditry, and clickbait that dominates today’s news. Real journalism, in the words of Joseph Pulitzer, is the painstaking reporting that will “fight for progress and reform, never tolerate injustice or corruption, [and] always fight demagogues.” Pulitzer said that journalism must always “oppose privileged classes and public plunderers, never lack sympathy with the poor, always remain devoted to the public welfare, never be satisfied with merely printing news, always be drastically independent, never be afraid to attack wrong, whether by predatory plutocracy or predatory poverty.”

Op-Ed: Bernie Sanders on his plan for journalism

Video: “How Liberals Normalized Conservative Ideas”

The New York Times’ Binyamin Appelbaum explains the role Democratic presidents, from Kennedy to Obama, in moving economic policy to the right

INET President Rob Johnson sits down with The New York Times’ Binyamin Appelbaum to discuss his new book, The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society (Little, Brown: 2019).